Making the minimum income scheme accessible for those who really need it

EsadeEcPol | Policy Insight

By EsadeEcPol

Author: Octavio Medina (Economist and senior associate, Ideas42)

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Executive summary

On 10 June, the Spanish Congress passed the national minimum income scheme (MIS). On paper, the new policy scheme reinforces Spain’s historically weak safety net. Unfortunately, the rollout of the national scheme is facing several problems. As of August, only 19% of the applications had been processed, and thousands of eligible families have not yet been able to access the programme.

To address the current challenges and maximise the potential impact of the new scheme, we propose three sets of specific strategies for application as soon as possible.

1. Make it simple and remove bureaucratic hassles by shifting the administrative burden from the citizen to the state:

  • Ensure widespread knowledge of the programme.
  • Identify administrative burdens in the application and renewal process and reduce them as much as possible.
  • Offer free and reliable assistance and guidance to applicants.

Make it accessible and non-stigmatising:

  • Provide access channels that address different group preferences and needs (for example, online platforms may be less accessible to the 65+ population).
  • Ensure that the application experience and in-person interactions are respectful and dignified to normalise the use of the scheme and reduce stigma.

3. Reach out directly and use local networks:

  • The poor have the most to gain from the scheme, but are simultaneously the worst positioned to easily access it.
  • Local government and community organisations are essential for contacting the hard to reach; use their data and qualitative knowledge to identify the eligible population and make sure that no one is left out.
  • Reach out directly to the target population to inform them of their eligibility (or even enrol them automatically).

The minimum income scheme (MIS): design and implementation

On 10 June, Congress passed the national minimum income scheme (MIS). This is good news for a number of different reasons. The most important is that Spain, as opposed to other European countries, does not have a national anti-poverty policy designed to protect its most vulnerable populations.

As a result of this failure in the safety net, job losses – which tend to be strongly procyclical – are linked to large increases in inequality, especially for the lower-most deciles of the population.

This weakness became obvious during the 2008 financial crisis, when the massive surge in unemployment led to a large increase in poverty rates. While in other European countries inequality increased because the rich were becoming richer when compared to the middle class, inequality in Spain increased because the poorest were becoming even poorer.

Spain, as opposed to other European countries, does not have a national anti-poverty policy designed to protect its most vulnerable populations

Despite the lack of a national strategy, there are some policies that try to fill that gap, many of them at the regional level. Perhaps the most noteworthy is the Basque Country’s renta de garantía de ingresos (RGI), which was launched in 1989 and was the first attempt at creating a minimum income scheme in Spain. Recent evaluations show that it is an effective programme, reducing extreme poverty from 5% to 3%. It does not seem to delay re-entry into the labour market; in fact, when combined with active labour market policies it makes recipients more likely to find a job.

Few of the other regional programmes have been evaluated in terms of their effectiveness. What we do know is that access varies considerably.

The independent fiscal authority – then headed by the current minister for social security and who is in charge of the design, approval, and implementation of the new MIS – pointed out last year that regions such as Asturias, Navarre, and the Basque Country have schemes that cover almost all the eligible population, while other regions such as Castilla La Mancha offer coverage for fewer than 10% of the population.

Colas ingreso mínimo
Thousands of eligible families have not yet been able to access the government's programme.

Unfortunately, it seems that the rollout of the national scheme is also facing several problems. As of August, only 19% of applications had been processed, and thousands of eligible families have not yet been able to access the programme. Reasons abound, such as lack of manpower to review documents, organisational constraints due to Covid, or a large number of applications that are either incomplete or contain errors.

This last point is particularly problematic. According to the government, close to 40% of applications were missing required documentation. If almost half of applicants are making mistakes on an application form, then chances are that the problem lies in the design of the programme or the form, and not the applicants.

Unfortunately, it seems that the rollout of the national scheme is also facing several problems

This highlights a perverse pattern of many social assistance programmes: when bureaucracies create burdens (or struggle to do their job), programme beneficiaries bear the costs.

Practitioners and policymakers should aim to make life easier for recipients when designing a programme or policy. Here are some key principles that can help:

Recommendation #1: Make it simple and reduce red tape

One of the key lessons we have learned over the years is that the practical design and implementation of a programme has a major impact on access. In the United States, for example, over 35% of people who were eligible to receive the Earned Income Tax Credit (EITC) did not access it. That added up to over one billion dollars in unclaimed benefits, or around a month of income per claimant. Other programmes have found similar results. In 2013, only 41% of the elderly population eligible for food stamps (through the Supplemental Nutrition Assistance Programme, or SNAP) accessed these benefits.

There is usually a mix of reasons – and one of these reasons is learning costs. The eligible population often does not know about the programme, or does not know that they qualify to benefit from it. For instance, 40% of EITC non-claimants were unaware of its existence, and another 30% were aware but did not know they were eligible.

The eligible population often does not know about the programme, or does not know that they qualify to benefit from it

Another is bureaucratic complexity, or compliance costs. Governments often – inadvertently or otherwise – add administrative burdens to social assistance programmes. These burdens can look minor from the perspective of the policymaker, but they quickly add up and can turn an easy process into an uphill battle for the applicant.

Recent research shows that over half of households that enrol in SNAP have exited the programme a year later, and the main drop offs occur at 6 and 12 months after initial enrolment. The reason? This is when programme recertification happens, which leads to a large number of applications being rejected for reasons not linked to eligibility.

Bureaucratic complexity means transferring the cost and burden of programme access from the state to the recipient. Besides being terribly unfair, this makes social assistance programmes less effective. Why? Because recipients must spend time and money on accessing them.

A Brookings study found that low-income households spent up to 20% of their EITC benefit on private financial advisors to obtain assistance for filling out forms. A more recent study suggests a wider bracket of between 13 and 21%. This is not a good use of public money and hurts the recipient and the provider.

The absurdity of bureaucratic hassle and poor design transfers money meant for the most vulnerable to third parties, thereby reducing the effectiveness of the safety net

Unfortunately, it seems that many of these common design problems have hampered the implementation of the Spanish MIS. Gathering together the documents required is a hassle, which has prompted many NGOs to open call-centres to help potential recipients.

Applicants are also unable to secure in-person appointments due to Covid restrictions, and are instead forced to apply online. However, many lack internet access – or the means to scan their documents – so they are forced to pay between 40 and 60 euros to intermediaries to get documents copied and applications submitted. This highlights the absurdity of bureaucratic hassle and poor design: it transfers money meant for the most vulnerable to third parties, thereby reducing the effectiveness of the safety net

To maximise take-up of a minimum income guarantee, it is crucial to make access easy. The solution for this is two-fold: first, make application forms as simple as possible; and reduce bureaucratic red tape. Minimise the steps required to apply, because each extra step can have a significant effect on whether an application is successful or not.

To maximise take-up of a minimum income guarantee, it is crucial to make access easy

As Don Moynihan pointed out, simplifying forms is low-hanging fruit for public officials: it is cheap and effective. For example, when the state of Michigan redesigned its benefits renewal form, the percentage of applicants who completed it rose from 73 to 96%.

Second, make sure that assistance is free and available for those who need it, since this can also have a significant impact on access. This is especially true for complicated procedures. A programme that provided information and free assistance for college applicants when applying for financial aid increased the percentage of students that completed two years of college from 28 to 36%.

The programme that just provided information had no significant effect and this suggests that knowledge is often not enough.

Going through endless bureaucratic processes is demoralising and makes people distrustful of the state

The main message is the following: shift the administrative burden from the citizen to the state (which is better suited for the task and often already has most of the required information). Going through endless bureaucratic processes is demoralising and makes people distrustful of the state. Instead, show users and citizens respect by valuing their time.

Of course, shifting the burden to the state is difficult during a pandemic, when the civil service is working at half capacity and demand spikes due to the economic crisis. For instance, at its peak, the Spanish public employment service had to deal with around 80,000 new requests for temporary employment adjustment schemes (Spain’s furlough programme).

The problem is aggravated by a series of structural limitations within the Spanish public administration that prevent it from being more flexible and adaptable to new challenges such as those posed by the current crisis. Proposing a full-scale reform of the administration falls beyond the scope of this paper, but it is worth noting that a lack of structural reforms will inevitably make it harder for policymakers to successfully implement modern social assistance programmes [1].

Recommendation #2: Make it accessible and non-stigmatising

A second crucial feature is to make the services accessible. Accessibility has many dimensions – including: geography (are there physical offices and where are they located?); time (are the offices open when people can easily visit?); friendliness (is the programme stigmatising and do clients feel humiliated?). Which of these matters most is a question of context.

A recent study looked at the effects of closing a social security office – somewhere clients can seek help for their applications – on the coverage of disability benefits in the area around the office. The closure led to a 16% decline in benefit recipients in the surrounding area. When an office closes, people may look for alternatives and find another channel for applications or recertifications. But some are invariably dissuaded and end up not accessing the service. 

Note that at a time when many agencies and governments are considering a switch to online services (due to the pandemic, but also to save costs), many demographics may have less access to online channels. For example, 90.7% of Spaniards report having used the internet over the past three months, but only 79.6% of those earning under €900 monthly do so.

90.7% of Spaniards report having used the internet over the past three months, but only 79.6% of those earning under €900 monthly do so

Among the elderly, accessibility is even worse: of those aged 75 or above, only 25% have ever used the internet.

When providing online services, it is also important to consider what platform the online system is designed for. The poor are much more likely to have access to a smartphone than a computer, for example. And yet, many online applications are built around desktop accessibility and look awful on a smartphone.

Additionally, consider that expanding online services at the expense of in-person services can have unintended consequences. For example, the state of Florida decided to engage in cost-cutting and opened an online portal for unemployment insurance applications. However, the new channel did not increase access because it was accompanied by restrictions on access to offline services.

Results can be positive when new channels are provided in addition to existing channels. A study in 2012 found that states that provided online applications for food stamps had a per capita participation that was 5-6% higher than states with no online application options.

In the case of Spain, applicants are struggling to get in-person appointments because the system is overwhelmed

In the case of Spain, numerous reports show applicants are struggling to get in-person appointments because the system is overwhelmed. At the end of August, over half of the provinces had no available appointments, preventing many potential recipients from getting the assistance they need to submit their applications.

Applying for social assistance in person can also be terribly stigmatising. There is plenty of evidence that families avoid applying because they may find the experience humiliating. For example, in the United Kingdom, a survey found that those attending food banks felt shame, and were concerned about being seen by their neighbours and perceived as failures for not being able to provide for their families.

This is also seen in other areas, such as health. People routinely do not seek out mental health services because they fear they will encounter discrimination or prejudice.

 There is plenty of evidence that families avoid applying because they may find the experience humiliating

The poor are also more likely to experience financial hardship and the mental stress and anxiety that follows from it. Some recent evidence even suggests that people accessing benefits may experience extra mental stress when the national conversation focuses on negative narratives around poverty and the "undeserving poor". In Denmark, periods of political debate around the concept of "deservedness" were associated with a higher use of antidepressants by people accessing benefits.

It must be ensured that throughout the entire application process potential recipients are treated with respect and dignity. Individual interactions between citizens and staff in public agencies can shape their entire experience of the programme. As Tony Judt suggested, we should ensure that social assistance is less of a "humiliating handout" and more of a "benefit as of right".

Recommendation #3: reach out directly and use local networks

The minister for social security has mentioned that the administration will be proactive about reaching out to eligible households. This is critical, since one of the problems of means-tested programmes is that they can depress access by placing the onus on citizens to apply. We know from behavioural science that defaults play a powerful role in determining take-up. It is no surprise that universal access programmes that are opt-out have more coverage than those that require an explicit and voluntary opt-in.

The households who would benefit the most from an MIS may also be those facing the highest hurdles when attempting access

For the case of the minimum income guarantee, the households who would benefit the most from an MIS may also be those facing the highest hurdles when attempting access. They are more likely to be unemployed, and less likely to make tax returns. This makes it harder for the state to find them.

When this is the case, the role of community organisations and local government is crucial, because they have more reliable information on the needs of the local population. They also have existing networks that may make it easier to communicate with the eligible population and provide help with the application forms. For example, evidence from the USA shows that access to community-based application assistance increased applications – especially from those with language barriers and immigration concerns.

The MIS implementation process has tried to rest partly on an existing network of local, regional, and civil society actors who have the information and already-functional support schemes. However, current results show that this has not been enough to reach all the population that needs it.

Finally, consider reaching out directly. Existing evidence shows that simple interventions such as mailings or other communications can increase programme take-up (although this is more effective if complemented with individual assistance).

For example, a mailing sent to earned income tax credit (EITC) non-claimants increased applications by 41%. The mailing communicated information about the programme clearly, emphasising the assistance that the recipient was eligible to receive (see below). Since the 90s, the American Internal Revenue Service has made an effort to improve overall communications to ensure that the language is easy to understand and actionable.

IRS figure
Source: IRS 2018

Conclusion

To sum up, passing a law creating an MIS is only the first step. A policy is only effective if it manages to reach those it was meant to reach. The details of design and implementation matter greatly, often in ways that are not obvious. To ensure that the MIS successfully decreases poverty, administrations should keep in mind key design principles:

  • Firstly, citizens should not face onerous red tape when accessing social services. Make applications simple, and shift the administrative burden from the citizen to the state. Do not make citizens provide the same information more than once, and provide free assistance when needed. Adding administrative burden can significantly decrease access.
  • Secondly, make the experience accessible and non-stigmatising. Be aware of the preferred channels of communication: physical offices matter for those with limited computer access. Make interactions respectful and non-stigmatising: people feel rightly humiliated and angry when they are not treated respectfully.
  • Thirdly, reach out directly. The poor are less likely to be employed and less likely to make tax returns. This means that focusing on traditional administrative data to target the programme may exclude much of the eligible population. Consider the role of local government and community organisations, and use their data in your targeting efforts to make sure no one is excluded. Finally, reach out to the eligible population directly to improve programme take-up.

References

[1]  For further reference, see Chapters 3, 4, and 6 in La urna rota (Debate, 2014).

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